Chapter 14
Cleary, Wasser and Nolan formed a partnership on January 1, 2013, with investments of $100,000, $150,000 and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary and 40% each for Wasser and Nolan. Net income was $150,000 in 2013 and $180,000 in 2014. Each partner withdrew $1,000 for personal use every month during 2013 and 2014. 17) What was Cleary's capital balance at the end of 2013?
$117,000 Beginning $100,000 + Interest $10,000 + Salary $0 + Remainder (20%) $19,000 - Withdrawals $12,000 =$117,000
Cleary, Wasser and Nolan formed a partnership on January 1, 2013, with investments of $100,000, $150,000 and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary and 40% each for Wasser and Nolan. Net income was $150,000 in 2013 and $180,000 in 2014. Each partner withdrew $1,000 for personal use every month during 2013 and 2014. 16) What was Wasser's capital balance at the end of 2013?
$201,000
Cleary, Wasser and Nolan formed a partnership on January 1, 2013, with investments of $100,000, $150,000 and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary and 40% each for Wasser and Nolan. Net income was $150,000 in 2013 and $180,000 in 2014. Each partner withdrew $1,000 for personal use every month during 2013 and 2014. 15) What was Nolan's capital balance at the end of 2013?
$246,000
Cleary, Wasser and Nolan formed a partnership on January 1, 2013, with investments of $100,000, $150,000 and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary and 40% each for Wasser and Nolan. Net income was $150,000 in 2013 and $180,000 in 2014. Each partner withdrew $1,000 for personal use every month during 2013 and 2014. 19) What was Wasser's capital balance at the end of 2014?
$264,540
Cleary, Wasser and Nolan formed a partnership on January 1, 2013, with investments of $100,000, $150,000 and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary and 40% each for Wasser and Nolan. Net income was $150,000 in 2013 and $180,000 in 2014. Each partner withdrew $1,000 for personal use every month during 2013 and 2014. 14) What was Cleary's share of income for 2013?
$29,000
9) The partnership contract for Hanes and Jones LLP provides that Hanes is to receive a bonus of 20% of net income and that the remaining net income is to be divided equally. If the partnership income before the bonus for the year is $57,600, Hanes' share of this pre-bonus income is:
$34,560
11) Max, Jones and Waters shared profits and losses 20%, 40% and 40% respectively and their partnership capital balance is $10,000, $30,000 and $50,000 respectively. Max has decided to withdraw from the partnership. An appraisal of the business and its property estimates the fair value to be $200,000. Land with a book value of $30,000 has a fair value of $45,000. Max has agreed to receive $20,000 in exchange for her partnership interest. What amount should land be recorded on the partnership books?
$45,000
Cleary, Wasser and Nolan formed a partnership on January 1, 2013, with investments of $100,000, $150,000 and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary and 40% each for Wasser and Nolan. Net income was $150,000 in 2013 and $180,000 in 2014. Each partner withdrew $1,000 for personal use every month during 2013 and 2014. 13) What was Nolan's share of income for 2013?
$58,000 Interest $20,000 + Salary $0 + Remainder (40%) $38,000 = $58,000
12) Cleary, Wasser and Nolan formed a partnership on January 1, 2013, with investments of $100,000, $150,000 and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary and 40% each for Wasser and Nolan. Net income was $150,000 in 2013 and $180,000 in 2014. Each partner withdrew $1,000 for personal use every month during 2013 and 2014. What was Wasser's share of income for 2013?
$63,000
Cleary, Wasser and Nolan formed a partnership on January 1, 2013, with investments of $100,000, $150,000 and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary and 40% each for Wasser and Nolan. Net income was $150,000 in 2013 and $180,000 in 2014. Each partner withdrew $1,000 for personal use every month during 2013 and 2014. 18) What was Wasser's share of income for 2014?
$75,540 Interest $20,100 + Salary $10,000 + Remainder (40%) $45,440 = $75,540
20) Which of the following could be used as a basis to allocate profits among partners who are active in the management of the partnership? 1) allocation of salaries. 2) the number of years with the partnership. 3) the amount of time each partner works. 4) the average capital invested.
1, 2, 3 and 4
7) Which of the following is not a characteristic of a partnership? It is easy to form a partnership Any partner can be held personally liable for all debts of the business Each partner has the power to obligate the partnership for liabilities A partnership requires written Articles of Partnership The partnership itself pays no income taxes
A partnership requires written Articles of Partnership
6) The advantages of the partnership form of business organization, compared to corporations, include Ease of raising capital Mutual agency Single taxation Limited liability Difficulty of formation
Single taxation
3) The dissolution of a partnership occurs When there is any change in the individuals who make up the partnership.
TRUE
5) Characteristics of a partnership are governed by the Uniform Partnership Act (UPA).
TRUE
10) The appropriate format of the January 31, 2015 closing entry for John & Hope Limited Liability Partnership, whose two partners had withdrawn their salaries from the partnership during January is A) John, Drawing XXX Hope, Drawing XXX Salaries Payable XXX B) Salaries Expense XXX John, Drawing XXX Hope, Drawing XXX C) John, Capital XXX Hope Capital XXX Salaries Payable XXX D) John, Capital XXX Hope, Capital XXX John, Drawing XXX Hope, Drawing XXX
D
1) The advantages of the partnership form of business organization, compared to corporations, include Limited liability.
FALSE
2) The partnership pays taxes on income before it is distributed to the individual partners.
FALSE
4) An advantage to the partnership form of business is that it has unlimited life that is separate from the individual partners.
FALSE
8) Which of the following statements is correct regarding the admission of a new partner? The right to participate in management of the business can be conveyed without the consent of other existing partners A new partner always pays book value The right of co-ownership in the business property can be transferred to a new partner without the consent of other existing partners The right to share in profits and losses can not be sold to a new partner without the consent of other existing partners A new partner must purchase a partnership interest directly from the business
The right of co-ownership in the business property can be transferred to a new partner without the consent of other existing partners
